Why are Community Banks in Australia Successful? An Exploration

23 Pages Posted: 25 Aug 2008 Last revised: 21 Nov 2008

Date Written: August 24, 2008

Abstract

Australia's community-based banks appear to be successful in communities where they are not the only bank. Using legitimacy theory and the theory of embeddedness as a framework, this study explores the importance of connectedness to and engagement with the local community as a way of legitimising a community-based bank's activities. An exploratory survey of community bank customers found community involvement to be significant factor in a respondent's decision to bank with a community-based bank. Additionally, the study suggests that fulfilment of a social contract between banks and customers is important and customers expect banks to legitimise their activities by contributing to local community projects. Finally this research suggests that customers of community-based banks see the nature of their service experience and how they as customers are made to feel as being the strength of community-based banks.

Keywords: community banks, legitimacy theory, embeddedness, success

JEL Classification: G21, M40

Suggested Citation

Duncan, Elizabeth, Why are Community Banks in Australia Successful? An Exploration (August 24, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1252642 or http://dx.doi.org/10.2139/ssrn.1252642

Elizabeth Duncan (Contact Author)

La Trobe University ( email )

Department of Economics and Finance
Victoria 3552, 3086
Australia

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